,Solution manual for Introduction to Health Care
Finance and Accounting , 2nd Edition Carlene
Harrison
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
Solution and Answer Guide
HARRISON, INTRODUCTION TO HEALTH CARE FINANCE AND ACCOUNTING, CY 2024, CORE ISBN
9780357622049; CHAPTER 1: The Environment of Healthcare Finance
TABLE OF CONTENTS
Comprehension Checks ............................................................................................................. 1
Comprehension Check 1.1 ........................................................................................................ 1
Comprehension Check 1.2 ........................................................................................................ 2
Comprehension Check 1.3 ........................................................................................................ 2
Knowledge Checks ..................................................................................................................... 3
Knowledge Check 1.1...............................................................................................................3
Knowledge Check 1.2...............................................................................................................4
COMPREHENSION CHECKS
COMPREHENSION CHECK 1.1
In the following questions, identify if the insurance carrier is looking for a provider within an
HMO or a PPO.
1. Sarah Jones is researching pediatrists in her local area. She has Great Shield Insurance
through her work, and she is looking for pediatrists only within her provider network. When
negotiating the contract with Great Shield Insurance, her insurance provider has agreed to only
accept a certain payment in return clients. Sarah will be scheduling an appointment with which
type of provider?
Answer:
Preferred Provider Organization
2. Alonzo Lopez needs surgery for his displaced shoulder. He has Bristol Insurance through his
workplace. Before he can schedule his surgery, he must meet with his primary physician who
will direct Alonzo to a specialist if the physician deems it is necessary. Alonzo will be scheduling
an appointment with which type of provider?
Answer:
Health Maintenance Organization
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
COMPREHENSION CHECK 1.2
In the following questions, identify if the type of medical business is a proprietorship, partnership, or an
LLP.
1. Dr. Evans was working for a major dental organization after completing his externship and
passing the Dental National Board Examination, Florida Laws and Rules Examination, and
ADEX Dental Licensing Examination. Dr. Evans decided to gain experience while working for a
major dental organization for several years. Dr. Evans opened his own dental practice. Dr.
Evans hired two dental assistants, a hygienist and an office manager. What type of medical
business would this be?
Answer:
Proprietorship
2. In January 2022, Dr. Evans and Dr. Briggs noticed an increase in business within the dental
practice that they have formed as a partnership. They both decide to form a partnership where
they will both be individually responsible for any malpractice settlements. What type of medical
business would this be?
Answer:
Limited liability partnership
3. Dr. Evans’ business has doubled within the last two years. More staff have been hired. There
are now two additional dental assistants, one additional dental hygienist, and a biller and coder.
In January 2021, Dr. Evans hires Dr. Briggs and decides to make her an equal partner. An
agreement is signed between Dr. Evans and Dr. Briggs. What type of medical business would
this be?
Answer:
Partnership
COMPREHENSION CHECK 1.3
1. Dr. Harden just graduated from veterinary medicine school. With the increase of animal
abandonment, she decided to open a shelter for misplaced animals. Her focus is to educate the
public on resources within the community to lessen animal abandonment rates. Through
researching how to establish her shelter, she discovered that under the Internal Revenue Code
Section 501© (3) her shelter would fall under a charitable organization. Is Dr. Harden operating
a profit or nonprofit business?
Answer:
Non-profit organization
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
KNOWLEDGE CHECKS
KNOWLEDGE CHECK 1.1
1. What are the major differences between financial management for healthcare facilities and
other types of free-enterprise businesses?
Answer:
A major difference is that the majority of customers of healthcare facilities do not pay the bills
themselves and the facilities have to deal with third-party payers, such as Medicare
and private insurance companies, for reimbursement. A second difference is that healthcare
facilities are a unique mix of for-profit and not-for-profit organizations and a mix of private
companies and governmental agencies.
2. What types of skills do you think are necessary for an effective financial manager in
healthcare?
Answer:
The skill set required for success as a healthcare financial manager is the same as in other
businesses. Accounting, budgeting, cash flow, and investment management are all required
skills.
3. Dr. Reginald Dustin is a licensed family practice physician. He has hired a staff of five to help
him in running the practice. He draws a monthly salary and leaves profits in the business for
capital purchases. This type of business is a:
A. Proprietorship
B. Partnership
C. For-profit corporation
D. Not-for-profit corporation
ANSWER:
A. Proprietorship
4. Dr. Towers has an established medical practice and wishes to expand the practice by
bringing in another physician. The two physicians agree to a document specifying how much the
new physician will pay into the business over time to secure an equity position, their monthly
salary draws, and a division of profits. This type of business is a:
A. Proprietorship
B. Partnership
C. For-profit corporation
D. Not-for-profit corporation
ANSWER:
B. Partnership
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
5. American Hospitals owns and operates 18 hospitals in 11 states. It is registered with the
Securities& Exchange Commission and has several thousand stockholders. This type of
business is a:
A. Proprietorship
B. Partnership
C. For-profit corporation
D. Not-for-profit corporation
ANSWER:
C. For-profit corporation
6. What is a professional corporation (PC), and why would this structure be an advantage to a
physician?
ANSWER:
In a proprietorship, the business owner has unlimited personal liability for debts or legal
settlements of the business. Structuring the business as a professional corporation (PC) shields
the personal assets of the business owner.
7. What is a 501(c)(3) corporation?
ANSWER:
A 501(c)(3) corporation is designated by the Internal Revenue Service as a not-for-profit
charitable organization exempt from property and income taxes.
KNOWLEDGE CHECK 1.2
1. Describe the impact of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) on
hospital finances.
Answer:
TEFRA placed financial limitations on Medicare reimbursement. The former cost plus
reimbursement system was replaced with standardized reimbursement schedules.
2. What is the major difference between a general hospital and a specialty hospital? Provide
examples of specialty hospitals.
Answer:
General hospitals provide a wide variety of medical care procedures to patients in their
geographic area. Specialty hospitals provide a higher level of care in a specific field referred to
as tertiary medical care. Specialty hospitals will include pediatric hospitals, burn centers, and
oncology centers for cancer treatment.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
3. What has been the financial impact on hospitals of the decline in inpatient care over the past
25 years?
Answer:
The total number of hospital beds per1, 000 population has declined dramatically since the
1980s. Hospitals have responded by expanding outpatient departments and home healthcare
services.
4. Which of the following would not be considered an outpatient facility?
A. A physician’s family care office practice
B. A walk-in clinic
C. A dental surgery office
D. A rehabilitation hospital that provides short-term stays for recovery and
rehabilitation treatments
E. All of the above are outpatient facilities
Answer:
E. All of the above are outpatient facilities
5. What are the basic services provided by home healthcare organizations?
Answer:
Home healthcare services include basic nursing services, such as changing dressings,
monitoring medications, providing short-term physical and occupational therapy, and providing
assistance in bathing and dressing. Other services may include shopping, transportation, and
meal preparation.
6. Describe the physical and service changes in the transition from traditional nursing homes to
modern model of life-care facilities (LCFs).
Answer:
The old single-building nursing home has expanded into a life-care campus to meet the
changing requirements of their residents. Many will include independent living units for active
seniors and a wide variety of educational and recreational opportunities. Medical services,
dining, and transportation are available based on resident needs. The level of services will
increase as residents lose their ability to function independently.
7. How does hospice care differ from traditional medical care?
Answer:
Traditional medical care is designed to enhance and prolong life. Hospice care provides
assistance to the special needs of patients in the last months of life and meets the emotional
needs of family members.
8. Define palliative care.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
Answer:
Palliative care is the medical side of end-of-life care, managing the symptoms of the patient’s
final illness and relieving pain.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 2:
Solution and Answer Guide
HARRISON, INTRODUCTION TO HEALTH CARE FINANCE AND ACCOUNTING, CY 2024, CORE ISBN
9780357622049; CHAPTER 2: Paying for Health Care
TABLE OF CONTENTS
Comprehension Checks ............................................................................................................. 1
Comprehension Check 2.1 ........................................................................................................ 1
Comprehension Check 2.2 ........................................................................................................ 1
Knowledge Checks ..................................................................................................................... 2
Knowledge Check 2.1...............................................................................................................2
Knowledge Check 2.2...............................................................................................................3
Knowledge Check
2.3.………………………………………………………………………………………….4
COMPREHENSION CHECKS
COMPREHENSION CHECK 2.1
1. Dr. Knowls owns several general practice medical facilities. Their five medical facilities are
located within the Southeast region territory. They and three other physicians monitor all
referrals before referring a patient to a specialist if needed.
This is an example of which type of plan?
Answer:
HMO
2. Dr. Tessnery has just started their dental practice. Various insurance companies negotiated
lower fees with Dr. Tessnery, which enabled them to increase patient load within their practice.
This is an example of which type of plan?
Answer:
PPO
COMPREHENSION CHECK 2.2
In questions 1 to 3, identify if the healthcare insurance option is Medicaid, Medicare, or CHIP.
1. Ava Kelm just turned 65 years old. She is concerned about how she will be able to afford
surgery on her leg. Her physician explained that she will have to stay overnight and have
several medical tests run. Under which type of insurance will Ava be covered?
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 2:
Answer:
Medicare
2. Luca Biel has had difficulty finding a full-time job. He has been working at the hospital as a
part-time patient care assistant. He is making just enough to cover the bills with nothing left
over. He cannot afford health insurance for his two children and is worried about it. What type of
insurance may be an option for his children?
Answer:
CHIP
3. Jennifer Brown had a stroke recently and she can no longer care for herself. She has used
all her financial resources to cover the assisted living expenses. What may be an insurance
option for her to consider?
Answer:
Medicaid
KNOWLEDGE CHECKS
KNOWLEDGE CHECK 2.1
1. Discuss preferred provider organization (PPO) plans. What are the main advantages and
disadvantages?
Answer:
PPO plans are able to offer plan participants lower premium rates by negotiating discounted fee
schedules with primary care physicians, specialists, and hospitals in return for directing
individuals in the plan to participating medical facilities. Fee schedules are discounted, but are
still based on fee-for-service. Plan participants
are restricted in their choices for receiving medical service.
2. Discuss health maintenance organizations (HMOs). What are the main advantages and
disadvantages?
Answer:
In HMO plans, medical service providers are compensated with a flat monthly
amount per insured called a capitation rate. These plans remove the incentive for providing
unnecessary treatment and encourage healthy lifestyles. Plan participants are limited to using
providers within the HMO plan and must use the plan’s “gatekeeper” before seeing specialists.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
Finance and Accounting , 2nd Edition Carlene
Harrison
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
Solution and Answer Guide
HARRISON, INTRODUCTION TO HEALTH CARE FINANCE AND ACCOUNTING, CY 2024, CORE ISBN
9780357622049; CHAPTER 1: The Environment of Healthcare Finance
TABLE OF CONTENTS
Comprehension Checks ............................................................................................................. 1
Comprehension Check 1.1 ........................................................................................................ 1
Comprehension Check 1.2 ........................................................................................................ 2
Comprehension Check 1.3 ........................................................................................................ 2
Knowledge Checks ..................................................................................................................... 3
Knowledge Check 1.1...............................................................................................................3
Knowledge Check 1.2...............................................................................................................4
COMPREHENSION CHECKS
COMPREHENSION CHECK 1.1
In the following questions, identify if the insurance carrier is looking for a provider within an
HMO or a PPO.
1. Sarah Jones is researching pediatrists in her local area. She has Great Shield Insurance
through her work, and she is looking for pediatrists only within her provider network. When
negotiating the contract with Great Shield Insurance, her insurance provider has agreed to only
accept a certain payment in return clients. Sarah will be scheduling an appointment with which
type of provider?
Answer:
Preferred Provider Organization
2. Alonzo Lopez needs surgery for his displaced shoulder. He has Bristol Insurance through his
workplace. Before he can schedule his surgery, he must meet with his primary physician who
will direct Alonzo to a specialist if the physician deems it is necessary. Alonzo will be scheduling
an appointment with which type of provider?
Answer:
Health Maintenance Organization
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
COMPREHENSION CHECK 1.2
In the following questions, identify if the type of medical business is a proprietorship, partnership, or an
LLP.
1. Dr. Evans was working for a major dental organization after completing his externship and
passing the Dental National Board Examination, Florida Laws and Rules Examination, and
ADEX Dental Licensing Examination. Dr. Evans decided to gain experience while working for a
major dental organization for several years. Dr. Evans opened his own dental practice. Dr.
Evans hired two dental assistants, a hygienist and an office manager. What type of medical
business would this be?
Answer:
Proprietorship
2. In January 2022, Dr. Evans and Dr. Briggs noticed an increase in business within the dental
practice that they have formed as a partnership. They both decide to form a partnership where
they will both be individually responsible for any malpractice settlements. What type of medical
business would this be?
Answer:
Limited liability partnership
3. Dr. Evans’ business has doubled within the last two years. More staff have been hired. There
are now two additional dental assistants, one additional dental hygienist, and a biller and coder.
In January 2021, Dr. Evans hires Dr. Briggs and decides to make her an equal partner. An
agreement is signed between Dr. Evans and Dr. Briggs. What type of medical business would
this be?
Answer:
Partnership
COMPREHENSION CHECK 1.3
1. Dr. Harden just graduated from veterinary medicine school. With the increase of animal
abandonment, she decided to open a shelter for misplaced animals. Her focus is to educate the
public on resources within the community to lessen animal abandonment rates. Through
researching how to establish her shelter, she discovered that under the Internal Revenue Code
Section 501© (3) her shelter would fall under a charitable organization. Is Dr. Harden operating
a profit or nonprofit business?
Answer:
Non-profit organization
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
KNOWLEDGE CHECKS
KNOWLEDGE CHECK 1.1
1. What are the major differences between financial management for healthcare facilities and
other types of free-enterprise businesses?
Answer:
A major difference is that the majority of customers of healthcare facilities do not pay the bills
themselves and the facilities have to deal with third-party payers, such as Medicare
and private insurance companies, for reimbursement. A second difference is that healthcare
facilities are a unique mix of for-profit and not-for-profit organizations and a mix of private
companies and governmental agencies.
2. What types of skills do you think are necessary for an effective financial manager in
healthcare?
Answer:
The skill set required for success as a healthcare financial manager is the same as in other
businesses. Accounting, budgeting, cash flow, and investment management are all required
skills.
3. Dr. Reginald Dustin is a licensed family practice physician. He has hired a staff of five to help
him in running the practice. He draws a monthly salary and leaves profits in the business for
capital purchases. This type of business is a:
A. Proprietorship
B. Partnership
C. For-profit corporation
D. Not-for-profit corporation
ANSWER:
A. Proprietorship
4. Dr. Towers has an established medical practice and wishes to expand the practice by
bringing in another physician. The two physicians agree to a document specifying how much the
new physician will pay into the business over time to secure an equity position, their monthly
salary draws, and a division of profits. This type of business is a:
A. Proprietorship
B. Partnership
C. For-profit corporation
D. Not-for-profit corporation
ANSWER:
B. Partnership
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
5. American Hospitals owns and operates 18 hospitals in 11 states. It is registered with the
Securities& Exchange Commission and has several thousand stockholders. This type of
business is a:
A. Proprietorship
B. Partnership
C. For-profit corporation
D. Not-for-profit corporation
ANSWER:
C. For-profit corporation
6. What is a professional corporation (PC), and why would this structure be an advantage to a
physician?
ANSWER:
In a proprietorship, the business owner has unlimited personal liability for debts or legal
settlements of the business. Structuring the business as a professional corporation (PC) shields
the personal assets of the business owner.
7. What is a 501(c)(3) corporation?
ANSWER:
A 501(c)(3) corporation is designated by the Internal Revenue Service as a not-for-profit
charitable organization exempt from property and income taxes.
KNOWLEDGE CHECK 1.2
1. Describe the impact of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) on
hospital finances.
Answer:
TEFRA placed financial limitations on Medicare reimbursement. The former cost plus
reimbursement system was replaced with standardized reimbursement schedules.
2. What is the major difference between a general hospital and a specialty hospital? Provide
examples of specialty hospitals.
Answer:
General hospitals provide a wide variety of medical care procedures to patients in their
geographic area. Specialty hospitals provide a higher level of care in a specific field referred to
as tertiary medical care. Specialty hospitals will include pediatric hospitals, burn centers, and
oncology centers for cancer treatment.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
3. What has been the financial impact on hospitals of the decline in inpatient care over the past
25 years?
Answer:
The total number of hospital beds per1, 000 population has declined dramatically since the
1980s. Hospitals have responded by expanding outpatient departments and home healthcare
services.
4. Which of the following would not be considered an outpatient facility?
A. A physician’s family care office practice
B. A walk-in clinic
C. A dental surgery office
D. A rehabilitation hospital that provides short-term stays for recovery and
rehabilitation treatments
E. All of the above are outpatient facilities
Answer:
E. All of the above are outpatient facilities
5. What are the basic services provided by home healthcare organizations?
Answer:
Home healthcare services include basic nursing services, such as changing dressings,
monitoring medications, providing short-term physical and occupational therapy, and providing
assistance in bathing and dressing. Other services may include shopping, transportation, and
meal preparation.
6. Describe the physical and service changes in the transition from traditional nursing homes to
modern model of life-care facilities (LCFs).
Answer:
The old single-building nursing home has expanded into a life-care campus to meet the
changing requirements of their residents. Many will include independent living units for active
seniors and a wide variety of educational and recreational opportunities. Medical services,
dining, and transportation are available based on resident needs. The level of services will
increase as residents lose their ability to function independently.
7. How does hospice care differ from traditional medical care?
Answer:
Traditional medical care is designed to enhance and prolong life. Hospice care provides
assistance to the special needs of patients in the last months of life and meets the emotional
needs of family members.
8. Define palliative care.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1:
Answer:
Palliative care is the medical side of end-of-life care, managing the symptoms of the patient’s
final illness and relieving pain.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
,Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 2:
Solution and Answer Guide
HARRISON, INTRODUCTION TO HEALTH CARE FINANCE AND ACCOUNTING, CY 2024, CORE ISBN
9780357622049; CHAPTER 2: Paying for Health Care
TABLE OF CONTENTS
Comprehension Checks ............................................................................................................. 1
Comprehension Check 2.1 ........................................................................................................ 1
Comprehension Check 2.2 ........................................................................................................ 1
Knowledge Checks ..................................................................................................................... 2
Knowledge Check 2.1...............................................................................................................2
Knowledge Check 2.2...............................................................................................................3
Knowledge Check
2.3.………………………………………………………………………………………….4
COMPREHENSION CHECKS
COMPREHENSION CHECK 2.1
1. Dr. Knowls owns several general practice medical facilities. Their five medical facilities are
located within the Southeast region territory. They and three other physicians monitor all
referrals before referring a patient to a specialist if needed.
This is an example of which type of plan?
Answer:
HMO
2. Dr. Tessnery has just started their dental practice. Various insurance companies negotiated
lower fees with Dr. Tessnery, which enabled them to increase patient load within their practice.
This is an example of which type of plan?
Answer:
PPO
COMPREHENSION CHECK 2.2
In questions 1 to 3, identify if the healthcare insurance option is Medicaid, Medicare, or CHIP.
1. Ava Kelm just turned 65 years old. She is concerned about how she will be able to afford
surgery on her leg. Her physician explained that she will have to stay overnight and have
several medical tests run. Under which type of insurance will Ava be covered?
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 2:
Answer:
Medicare
2. Luca Biel has had difficulty finding a full-time job. He has been working at the hospital as a
part-time patient care assistant. He is making just enough to cover the bills with nothing left
over. He cannot afford health insurance for his two children and is worried about it. What type of
insurance may be an option for his children?
Answer:
CHIP
3. Jennifer Brown had a stroke recently and she can no longer care for herself. She has used
all her financial resources to cover the assisted living expenses. What may be an insurance
option for her to consider?
Answer:
Medicaid
KNOWLEDGE CHECKS
KNOWLEDGE CHECK 2.1
1. Discuss preferred provider organization (PPO) plans. What are the main advantages and
disadvantages?
Answer:
PPO plans are able to offer plan participants lower premium rates by negotiating discounted fee
schedules with primary care physicians, specialists, and hospitals in return for directing
individuals in the plan to participating medical facilities. Fee schedules are discounted, but are
still based on fee-for-service. Plan participants
are restricted in their choices for receiving medical service.
2. Discuss health maintenance organizations (HMOs). What are the main advantages and
disadvantages?
Answer:
In HMO plans, medical service providers are compensated with a flat monthly
amount per insured called a capitation rate. These plans remove the incentive for providing
unnecessary treatment and encourage healthy lifestyles. Plan participants are limited to using
providers within the HMO plan and must use the plan’s “gatekeeper” before seeing specialists.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
